The following are the key highlights of the approach paper
issued by RBI on National Strategy for Financial Inclusion 2019-2014.
Introduction
Financial inclusion is increasingly being recognized as a key
driver of economic growth and poverty alleviation the world over. Access to
formal finance can boost job creation, reduce vulnerability to economic shocks
and increase investments in human capital.
There has been a growing evidence on how financial inclusion has
a multiplier effect in boosting overall economic output, reducing poverty and
income inequality at the national level. Financial inclusion of women is
particularly important for gender equality and women’s economic empowerment.
Definition
In Indian context the financial inclusion has been defined as
“the process of ensuring access to financial services, timely and adequate
credit for vulnerable groups such as weaker sections and low-income groups at
an affordable cost”.
Vision
To make financial services available, accessible, and affordable
to all the citizens in a safe and transparent manner to support inclusive and
resilient multi-stakeholder led growth.
Challenges
Despite the various measures that have been undertaken by
various stakeholders in strengthening financial inclusion in the country, there
are still critical gaps existing in the usage of financial services that
require attention of policy makers through necessary co-ordination and
effective monitoring.
1. Inadequate
Infrastructure: Limited physical infrastructure, limited transport
facility, inadequately
trained staff etc., in parts of rural hinterland and far flung areas of the
Himalayan and North East regions create a barrier to the customer while
accessing financial services.
2. Poor Connectivity: With technology becoming an
important enabler to access financial services, certain regions in the country
that have poor connectivity tend to be left behind in ensuring access to
financial services thereby creating a digital divide.
3. Convenience and Relevance: The protracted and
complicated procedures act as a deterrent while on-boarding customers. This
difficulty is further increased when the products are not easy to understand,
complex and do not meet the requirements of the customers such as those
receiving erratic and uncertain cash flows from their occupation.
4. Socio-Cultural Barriers: Prevalence of certain value
system and beliefs in some sections of the population results in lack of
favourable attitude towards formal financial services. There are still certain
pockets wherein women do not have the freedom and choice to access financial
services because of cultural barriers.
5. Product Usage: While the mission-based
approach to financial inclusion has resulted in increasing access to basic
financial services including micro insurance and pension, there is a need to
increase the usage of these accounts to help customers achieve benefits of
relevant financial services and help the service providers to achieve the
necessary scale and sustainability.
6. Payment Infrastructure: Currently, majority of the
retail payment products viz., CTS, AEPS, NACH, UPI, IMPS etc. are operated by
National Payments Council of India (NPCI), a Section (8) Company promoted by a
group of public, private and foreign banks. There is a need to have more market
players to promote innovation & competition and to minimize concentration risk
in the retail payment system from a financial stability perspective.
Strategy
While a lot of efforts have been undertaken to increase
financial inclusion in the country to promote financial inclusion, a lot of
steps are further needed to ensure adequate access to financial services and
usage of these services by various segments of underserved and un-served
population in India, so far. Anchored in the country’s development priorities,
the NSFI 2019-2024 seeks to address the inherent barriers of access to a gamut
of financial products and services.
Action plan
Universal Access to Financial Services
- Increasing outreach of banking outlets of Scheduled Commercial Banks /Payments Banks/ Small Finance Banks, to provide banking access to every village within a 5 KM radius/ hamlet of 500 households in hilly areas by March 2020.
- Strengthen eco-system for various modes of digital financial services in all the Tier-II to Tier VI centres to create the necessary infrastructure to move towards a less cash society by March 2022.
- Leverage on the developments in fin-tech space to encourage financial service providers to adopt innovative approaches for strengthening outreach through virtual modes including mobile apps so that every adult has access to a financial service provider through a mobile device by March 2024.
- Move towards an increasingly digital and consent-based architecture for customer onboarding by March 2024.
Providing Basic Bouquet of Financial Services
- Every willing and eligible adult who has been enrolled under the PMJDY (including the young adults who have recently taken up employment) to be enrolled under an insurance scheme (PMJJBY, PMSBY, etc.), Pension scheme (NPS, APY, etc.) by March 2020.
- Capacity building of all BCs either directly by the parent entity or through accredited institutions by March 2020.
- Make the Public Credit Registry (PCR) fully operational by March 2022 so that authorised financial entities can leverage on the same for assessing credit proposals from all citizens.
Access to Livelihood and Skill Development
- All the relevant details pertaining to the ongoing skill development and livelihood generation programmes through RSETIs, NRLM, NULM, PMKVY shall be made available to the new entrants at the time of account opening. The details of the account holders including unemployed youth, and women who are willing to undergo skill development and be a part of the livelihood programme may be shared to the concerned skill development centres/ livelihood mission and vice versa by March 2020.
- Keeping in view the importance of handholding for the newly financially included SHGs/ Micro entrepreneurs, a framework for a focused approach ensuring convergence of efforts from civil society/ banks/ NGOs to increase their awareness on financial literacy, managerial skills, credit and market linkages needs to be developed by National Skill Development Mission by March 2022.
Financial Literacy and Education
- Develop financial literacy modules through National Centre for Financial Education (NCFE) that cover financial services in the form of Audio-Video content/ booklets etc. These modules should be with specific target audience orientation (e.g. children, young adults, women, new workers/ entrepreneurs, senior citizens etc.) by March 2021.
- Focus on process literacy along with concept literacy which empowers the customers to understand not only what the product is about, but also helps them how to use the product by using technology led Digital Kiosks, Mobile apps etc. through the strategy period (2019-2024).
- Expand the reach of Centers for Financial Literacy (CFL) at every block in the country by March 2024.
Customer Protection and Grievance Redressal
- Strengthening the Internal Grievances Redressal Mechanism of financial service providers for effectiveness and timely response by March 2020.
- Develop a robust customer grievance portal/ mobile app which acts as a common interface for lodging, tracking and redressal status of the grievances pertaining to financial sector collectively by all the stakeholders by March 2021.
- Operationalize a Common Toll-Free Helpline which offers response to the queries pertaining to customer grievances across banking, securities, insurance, and pension sectors by March 2022.
- Develop a portal to facilitate inter-regulatory co-ordination for redressal of customer grievance by March 2022.
Effective Co-ordination
- Clearly articulate the responsibilities/ expectations of each of the stakeholders at the grass-root level to ensure convergence of action between the Government/ Regulators/financial service providers/ Civil Society etc. With the Lead Bank Scheme completing 50 years in 2019, SLBCs may review and implement the vision, action plans and the milestones to be achieved during the NSFI period (2019-24).
- With advancements in Geo-Spatial Information Technology, a robust monitoring framework leveraging on the said technology can be developed for monitoring progress under financial inclusion with special emphasis given to Aspirational Districts, North Eastern Region and Left -Wing Extremist affected Districts. A monitoring framework and a GIS dashboard to be developed by March 2022.
Measurement of outcome
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